Right, the freewheel version has a fairly thick washer on each side of the axle; by removing these you can narrow the hub a bit with no risk of adverse effect. If you really need to, you can remove more washers and replace them with thinner ones or do without; you can also grind down the locknuts and that kind of thing, shave another one or two mm somewhere. The more you do of this kind of thing, the greater your risk of adverse effect. The drum brake version of the hub is wider, and if you make the axle shorter you will have problems.